Japan, Australia Stocks Hit 4-1/2 Year High

Asian shares hit fresh highs on Wednesday, extending the previous day's rally after a record close for the Dow Jones stock index on upbeat U.S. economic news boosted risk appetite further.

Australia's ASX 200index and Japan's Nikkei both hit fresh four-and-a-half-year highs, South Korea's Kospi rose 0.2 percent to trade 20 points within reach of an 11-month peak and the Shanghai Composite continued its rebound from Monday's six-week low.

Data on Tuesday showing the U.S. services sector grew last month at its fastest pace in a year and a pledge by China's government to boost spending in 2013 lifted hopes of a global economic recovery, fueling a rally in global markets that has been driven by aggressive monetary easing by major central banks.

Some analysts warn that the rally may be the beginning of a bubble. U.S. shares are up almost 7 percent since the start of the year, European markets have gained about 5 percent, while in Asia, Japanese shares have soared almost 13 percent.

"I think stocks could very well rally through the rest of this year, even into 2014 based on this wave of money, but at some point it will pop and collapse, and that's what investors need to bear in mind," said Jim Rickards of Tangent Capital on CNBC Asia's "Squawk Box."

Nikkei Crosses 11,900

Tokyo equities closed firmly above the 11,900-mark to their highest level since September 2008, thanks to a 14 percent surge in Sharp shares.

The struggling Japanese firm was in the spotlight after reports that Samsung Electronics may invest as much as 10 billion yen ($107 million) for a 3 percent stake in Sharp, boosting its chances of survival. The news sparked a rally across Asian electronic firms, with Japan's DSM gaining 9 percent and Korea's Huneed Technologies up 13 percent.

Exporters have led the Nikkei index to rally nearly 35 percent since November on the back of a weak yen but in a change of pace, investors are now buying into domestic-demand focused stocks on hopes that Prime Minister Shinzo Abe's reflationary agenda will succeed.

Fast Retailing, which runs the Uniqlo clothing chain, for example soared more than 8 percent on Wednesday. This surge in risk appetite could soon see the benchmark test the 12,000-level, analysts say.

Australia GDP Spurs Rally

RBA to Cut Rates by 0.25% in 2013

Bill Evans, Global Head of Economics at Westpac Bank, believes Australia's central bank could ease further in 2013. He says the mining sector will pose the greatest policy challenge this year.

In Sydney, strong fourth-quarter GDP data spurred a near 1 percent rally in Australia's benchmark index. The market held well-above the 5,100-mark for the entire session, levels not seen since September 2008.

Banks extended gains with Westpac up .3 percent. Resources rebounded after a rise in copper prices overnight thanks to a strong demand outlook from China. BathurstResources led gains with a 7 percent rise while the world's top miner BHP Billiton rallied 1 percent.

Greater China's Gains

StanChart CEO on Why Bonus Clampdown is Unfair

Jaspal Bindra, Asia CEO at Standard Chartered, tells CNBC how the bank managed to post a $6 billion profit despite being hit by a whopping $667 million fine for violating U.S sanctions.

Financials took the spotlight in Greater China. Shares of Hong Kong-listed Standard Charteredrose 1.9 percent after the bank delivered a record tenth straight year of profits.

Telcos were also in focus after Hong-Kong listed ZTE rose 8.2 percent on reports that the handset maker may enter a strategic collaboration with Intel.

The Shanghai Composite posted a second straight day of gains after the index closed up 0.9 percent at 2,347 points. The index hit a 10-month high of 2,444 points in February and has hovered around the 2,250 to 2,300 levels, while Hong Kong stocks remain well-off last month's 23-month high of 23,944 points.